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Insurance Fintech is something of a dog that doesn’t bark much. As Steven Mendel, CEO and founder of Bought By Many a rare example of a successful and innovative insurance fintech, says, the key players in this sector across the whole of europe can be counted on ones fingers.
Fintech is of course new digital technologies impacting upon Financial Services as a whole – not just banks as folks are wont to say. In LFP006 John Shaw, Head of Innovation and R&D at Direct Line gave us the BigCo view of the impact of fintech upon insurance.
In this episode Steven explains why there are so few insurance fintechs out there.
The company that Steven founded and now runs is Bought by Many (BBM) is one of the leading lights in insurance fintech. It is “social insurance”. As they say on their website:
Bought By Many is a free, members-only service that helps you find insurance for the things in your life that are out of the ordinary. It’s easier than using a comparison website or trying insurance companies one at a time.
They have 248 groups of folks who require specialist coverage; 62,497 members who get an average discount of 18.6% to market rates.
Topics discussed include:
– Steven’s breadth of experience across Finance (and the Art world) and building new businesses
– models of what a European vibe to Fintech and Tech might involve – especially with a focus on creating interesting employment for people as well as simply making a few extremely rich. The restrictions upon any “European” vibe imposed by the VC model which is purely financial in its objectives
– purpose-driven businesses – the BBM mission to solve people’s insurance challenges
– social insurance and groups and how this works in terms of getting specialist coverage whether for Pug dogs (an interesting tale), or Travel Insurance for the elderly or those with Crohns disease or Quad Bikers or the many many specialist areas BBM serves
– the social angle (online and offline) of social insurance and how that relates to BBM’s business model. How BBM identifies new business areas
– the wholesale to retail transformation at the heart of the social insurance model. If you have a special insurance need and there is only one of you, by definition you won’t get a good price. However once there are many of you and there is (in effect) a broker to negotiate a better deal for you all, you will
– if you have a standard need then price comparison sites are the best route. However if a bespoke need (and BBM’s research found that as much as 40% of the UK insurance market could be in this category) then one is better served by the likes of BBM or specialist face-to-face brokers (but they can charge 30-35% commission (which is not obvious as it is hidden))
– why there are so few insurance fintechs;
- Large insurers don’t attract folks whose aim is to disrupt
- There aren’t many insurance fintechs which in itself becomes a self-fulfilling prophecy
- The need to access market insurance capacity and the inability of a fintech to directly take insurance risk (if a fintech would then it would have the huge capital and regulation burdens and just be “a new insurance company”) narrows the options
– as a result the insurance fintech models are in general either a brokerage approach (BBM – if you buy a policy through them you buy it from the insurer they have arranged) or a P2P insurance model.
– we discuss some scepticism around P2P applied to insurance (would you eg trust me to insure your phone (especially as insurance risk works by aggregating to smooth the return profile))
– the need to work with not against the industry for fintechs (cf Mike Laven’s identical remarks re Currency Cloud).
– the challenge of interacting with large, slow-moving companies whether banks or insurance firms. How BBM have turned this situation around and not just created an alignment of interest between themselves and insurers but an attraction angle whereby it’s in insurance companies self-interest to work with them.
– Insurance 3.0 (and 2.0 and 1.0)
– BBM’s plans for expansion
And much much more 🙂 Plenty of interesting content on a rare and interesting sector. Very useful for broadening one’s perspective of Fintech beyond the usual areas 😉